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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Entry of new firms shifts the cost curves for all firms upward






2. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






3. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






4. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






5. The practice of selling essentially the same good to different groups of consumers at different prices






6. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






7. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






8. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






9. All firms maximize profit by producing where MR = MC






10. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






11. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






12. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






13. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






14. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






15. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






16. Product demand - productivity - prices of other resources - and complementary resources






17. The imbalance between limited productive resources and unlimited human wants






18. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






19. The sum of consumer surplus and producer surplus






20. Models where firms are competitive rivals seeking to gain at the expense of their rivals






21. Exists at the point where the quantity supplied equals the quantity demanded






22. The mechanism for combining production resources - with existing technology - into finished goods and services






23. Exists if a producer can produce more of a good than all other producers






24. Ei = (%dQd good X)/(%d Income)






25. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






26. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






27. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






28. ATC = TC/Q = AFC + AVC






29. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






30. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






31. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






32. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






33. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






34. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






35. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






36. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






37. The additional benefit received from the consumption of the next unit of a good or service






38. Exists if a producer can produce a good at lower opportunity cost than all other producers






39. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






40. The total quantity - or total output of a good produced at each quantity of labor employed






41. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






42. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






43. AFC = TFC/Q






44. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






45. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






46. The rational decision maker chooses an action if MB = MC






47. Ed > 1 - meaning consumers are price sensitive






48. Entry (or exit) of firms does not shift the cost curves of firms in the industry






49. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






50. Ed = 8 - infinite change in demand to price change